The numbers are staggering. In 2006 the percentage of Americans that were faced with a foreclosure was .58{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} of all house holds, in 2007 that percentage rose to 1{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} that is a 42{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} increase and 1{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} may seem like a small number but we are talking 1{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} of millions and millions of homes. For the state of Florida the percentage is double that of the nation as a whole with 2{d4f7c08805e41e9b9974dfba619ed7230ec2da6e442055d48085a7994e8adaef} of all Floridians entered into some stage of foreclosure and a total of 165,291 homes foreclosed on in 2007. Sadly, Central Florida has been among the worst hit by this trend with some neighborhoods beginning to become run down because of the vacant homes with unkempt lawns or rental homes with multiple families occupying them causing the home front to resemble a parking lot.
So what has caused this to take place? In 2005 the Central Florida area experienced a hot seller’s market that quite literally burned out of control. Houses were selling like hot cakes, listings were flying off the shelf faster than agents could believe – homes were listed one minute and sold the next. At the same time home prices were being drove up and up and up – ridiculously! It was unbelievable we saw $10,000 increases in that matter of 7 days! The market at this time pushed home prices up so high that the average person in this area could no longer afford to purchase a home based on the average salary in the area. The market needed some serious correcting, and the result; home prices plummeting over the past 12 months.
Many of the buyers in 2005 could only qualify for a two or three year (also known as sub-prime) adjustable rate mortgage. So their rates adjusted, payments went up leaving the homeowner no longer able to afford their payments and the ripple affect goes on and on leaving many Central Floridians without a paddle so to speak. A decrease in income due to the economic hardship has also become more apparent as many types of employment that supported the Floridian have drastically decreased, such as contractors and laborers. It is becoming more common to see developments stagnant as the funds and demand for homes no longer exists. For the lucky few who STILL have a good credit score and the option to refinance the adjustable rate mortgage, cannot do so! A home can only be refinanced for what it is worth. What is becoming a very common phenomenon is that the current adjustable rate mortgage EXCEEDS the appraisal value. Therefore, a refinance to a fixed rate mortgage is not possible. An example: Mortgage amount $300,000…current appraisal value $220,000.
THE FORMULA LEADING TO FORECLOSURE: An adjustable rate mortgage resulting in higher monthly mortgage payments, unable to refinance due to current value of home and/or current credit score, and personal and/or financial hardship such as a divorce or loss of income. Foreclosure will knock at your door!
The good news is that everything turns around and if you are able to stay in your home and ride this out, eventually property values will start going up again. If you have found yourself in the situation that you can no longer afford your mortgage payment either because your rate has or is going to adjust, increases in taxes or insurance premiums, perhaps there has been a sickness or disability in your household or someone has lost their job (there is certainly a lot of that going on these days) YOU DO HAVE OPTIONS AND YOU CAN AVOID FORECLOSURE and save your credit from the black eye that comes along with it! If you are behind on your mortgage or if you know you are not going to be able to afford the payment because your rate is going to adjust or any other reason you need to start exploring your options now.
